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Equity - Breach of Trust. Carroll v. Toronto-Dominion Bank
In Carroll v. Toronto-Dominion Bank (Ont CA, 2021) the Court of Appeal considered an interesting whistleblower standing case where a former bank employee sought an application for various remedies that were directed at exposing the bank's breach of fiduciary duty to investors. One of the issues was whether the applicant was a 'constructive trustee':[46] The motion judge was also correct in rejecting Ms. Carroll’s contention that she could sustain a standing claim based on her potential liability as a constructive trustee. There are three possible avenues to personal liability as a constructive trustee:• As a “knowing assister”, who knowingly or wilfully blindly encouraged or assisted in a dishonest and fraudulent breach of trust: Air Canada v. M & L Travel Ltd., 1993 CanLII 33 (SCC), [1993] 3 S.C.R. 787, at pp. 809-11;
• As a “knowing receiver”, who knowingly, or wilfully blindly, or with knowledge of facts which would put an honest person on inquiry, received trust property in their own capacity in breach of trust: Air Canada, at pp. 810-13; or
• As a trustee de son tort, who assumed the role of trustee without proper appointment and then breached the trust: Air Canada, at pp. 808-9. [47] The motion judge addressed the first avenue of potential liability, “knowing assistance”, and dismissed it because there was no evidence before her that Ms. Carroll participated in any breaches of trust. Indeed, the pleadings before the motion judge maintained that Ms. Carroll made efforts to prevent and remedy any alleged wrongdoing.
[48] Ms. Carroll argues on appeal that, despite this, it is not plain and obvious that she would not be exposed to personal liability as a constructive trustee, given her role as a corporate officer of the Trustee at the time the maladministration occurred. I disagree. The motion judge was correct in finding that there was no foundation that could support Ms. Carroll’s liability as a knowing assister. There was no need for the motion judge to address knowing receiver or trustee de son tort liability, as neither form of liability is even hinted at in the pleadings. Absolutely no suggestion is made that Ms. Carroll received trust property, and there is no indication that she assumed the role of trustee.
[49] In these circumstances, the fact that Ms. Carroll sought indemnity in her application does not provide a path for her standing. “It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim”: R. v. Imperial Tobacco Canada, 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 22. Ms. Carroll has pled no facts that could support such relief. Carriere Industrial Supply Limited v. Toronto-Dominion Bank
In Carriere Industrial Supply Limited v. Toronto-Dominion Bank (Ont CA, 2015) the Court of Appeal set out the elements required to find 'recklessness' in a breach of trust case, drawing from a parallel definition of that term in a Supreme Court of Canada criminal case:[30] As stated by the trial judge at para. 94, the Bank “had clear notice of a real possibility of past actions constituting a breach of trust in respect of the operations of TPC, possibly extending to fraud, by an unknown party.” In continuing to afford unmonitored access to electronic banking facilities in the face of this knowledge, the trial judge found the Bank acted recklessly.
[31] As we read the trial judge’s reasons, the knowledge component of his conclusion was premised on the information the Bank had, not on its failure to acquire additional information through monitoring. As the Supreme Court of Canada stated in R. v. Sansregret, 1985 CanLII 79 (SCC), [1985] 1 S.C.R. 570, 17 D.L.R. (4th) 577, recklessness consists of knowledge of a danger or risk and persistence in a course of conduct that creates a risk that the prohibited result will occur. In our view, the trial judge did not misapply this definition.
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